Paydirt: When you’re a unicorn, they let you do it

Compass is no longer fighting the same fight as its brokerage competitors.

In 2014, Compass first felt the wrath of the white glove. The residential brokerage – and much as it loathes that term, that’s what it is, at least for now – had just poached Kyle Blackmon from Brown Harris Stevens, and Hall Willkie didn’t take too kindly to losing one of his top earners.

“The value of Kyle’s or anyone’s equity will be dependent on the success of Urban Compass’ founders implementing their vision of selling their company for substantially more than many industry experts believe is possible,” Willkie said at the time. Compass’ CEO Robert Reffkin responded, as one does, with Gandhi. “First they ignore you,” he tweeted, “then they laugh at you, then they fight you, then you win.”

We haven’t gone the full 12 rounds yet. But what’s clear after Compass’ $450 million infusion from SoftBank is that the firm is no longer fighting the same fight as its brokerage competitors. Much like WeWork, Masa Son’s other big bet in the real estate space, Compass is taking pains to position itself above the herd. It markets itself as a “portal,” a curator of data, a broker’s best friend, the tool that will unlock their hidden potential.

In terms of the broader PR battle to do so, it’s already won. Read this drivel from TechCrunch, which is any publicist’s dream:

“…you might think of Compass as the equivalent of the launch of
the first iPhone to the various other smartphones that preceded it.”

But with a war chest of $775 million and possibly more to come, its main opponent is now itself – can it control costs and profitably establish a plug-and-play product all over the world? After hitting revenues of $180 million in 2016, it’s projecting that revenue will hit $350 million in 2017 and somehow more than double to $800 million by 2018. This in the face of a middling luxury market overall, and a not-quite-stellar new development division for Compass in particular. But challenging that figure is tricky because it can just acquire its way to those targets. When an emperor has that much cash, he doesn’t need clothes.

Here comes the president!: In the world of brokerages that are still brokerages, the big news was Elliman’s decision to promote Scott Durkin, who’s been leading the firm’s national charge, to president.

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What I found oddest was the organization chart it leaves Elliman with – the CEO, Dottie Herman, no longer seems to have any direct reports. Durkin, whose stable of direct reports includes the brokerage heads for the Western region, New York and Florida, added to the confusion by emphasizing Herman’s role as a “brand ambassador,” which seems a fairly pedestrian role for a CEO to have. He did, however, note that she still owns a piece of the company, so there’s that I suppose.

Tax cheat sheet: Do read Katie Brenzel’s analysis of how the GOP tax plan will impact New York real estate. The big wins seem to be the reduction of rates on pass-through entities, a lower depreciation schedule and a slash to the estate tax. The question marks: the elimination of the federal deduction of state income taxes, and the elimination of private-activity bonds. Of course, private jets will thrive in said plan.

Retail’s alpha dogs: “Deals are still happening.” “I’m still transacting, bro.” “This was my best year ever.” “Thank god, the market is good.”

TRD’s new ranking of Manhattan’s top retail firms is out, and it tells an interesting tale: Though the top 15 firms in Manhattan leased 27 percent less year-over-year, landlords seem to be finally budging on rents, and so brokers are able to make things happen. RKF knocked CBRE off its perch, doing more than 1 million square feet in deals during the period, while Cushman held onto its second place spot, albeit with a lower deal volume. In Brooklyn, Winick took the crown.

Chaser: My colleague Mark Maurer has a knack for infiltrating the clandestine corners of New York real estate. Last year, he delivered an opus on the Brooklyn Hasidim, who’ve crafted a multifamily and office empire in the borough but manage to stay in the shadows. His latest story looks at the fascinating world of real estate syndication, which allows aspiring owners to tap into an army of faceless investors behind the scenes. It’s a juicy read, and I highly recommend it.

(Paydirt is a weekly column that riffs on the biggest NYC real estate news of the moment, providing analysis and historical context on the deals and players that make this town tick. Read more from Paydirt here.)